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eligibility to become auditor of listed company

Dixita panchal (Student) (211 Points)

15 June 2018

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Sarath Rajendran (Nil) (2791 Points)
Replied 15 June 2018

Eligibility and qualification of auditors Sub-section (1) of section 141 provides that a person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant. Chartered Accountant has been defined in sub-section (17) of section 2 of the Act as under: “chartered accountant” means a chartered accountant as defined in clause (b) of subsection (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice under sub-section (1) of section 6 of that Act. Further, as per clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949, “chartered accountant” means a person who is a member of the Institute. Further, sub-section (1) of section 6 of the said Act deals with certificate of practice and states as under: “Section (6) Certificate of Practice: No member of the Institute shall be entitled to practice whether in India or elsewhere unless he has obtained from the Council a certificate of practice: Provided that nothing contained in this sub-section shall apply to any person who, immediately before the commencement of this Act, has been in practice as a registered accountant or a holder of a restricted certificate until one month has elapsed from the date of the first meeting of the Council.” © ICSI – Reproduction of any material / contents shall be only with prior permission of ICSI From the above, it is clear that the word “chartered accountant” has been used throughout the Act, unless the context otherwise requires, to mean a practicing chartered accountant. Further, proviso to sub-section (1) of section 141 provides that a firm whereof majority of partners practicing in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of the company. In other words, the proviso clarifies that only such audit firms would be eligible to be appointed as auditor of the company where majority of the partners practicing in India are chartered accountants as defined in subsection (17) of section 2 of the Act. As per sub-section (2) of section 141, where a firm including a limited liability partnership (LLP) is appointed as an auditor of a company, only the partners who are chartered accountants shall be authorized to act and sign on behalf of the firm. This sub-section further finds reference in section 145 which provides for signing and certification audit reports and other documents.